The migration to S/4HANA is an important topic for SAP customers. But how are they progressing with the modernization of their ERP systems during the global pandemic? A recent study shows: While some companies are postponing the migration, others are accelerating the changeover.
Despite the global pandemic and IT budgets cuts, S/4HANA remains a top IT topic: SAP customers have recognized the need to digitize processes and adapt to growing market demands – further, they regard the switch to the real-time ERP suite as the ideal foundation.
According to a recent study conducted by Lünendonk & Hossenfelder, a majority of companies (87 percent) therefore intend to implement the transformation as planned over the next four years. Once the strategy and roadmap development is complete, more than two-thirds of respondents (69 percent) aim to initiate the S/4HANA rollout between 2021 and 2023.
It appears that many user companies may not necessarily want to take advantage of the extended timeframe for conversion that SAP has granted them due to the complexity involved. External consulting and IT service providers are therefore likely to be in high demand, the study authors suggest. Nevertheless, the pandemic has affected the S/4HANA rollout in some companies.
S/4HANA: Transformation pace varies
Just under fifty percent of large SMEs and corporate enterprises (47 percent) initially halted the S/4HANA project due to the pandemic and then continued it with a modified scope. Decision-makers in the mechanical and plant engineering and automotive sectors (44 percent) as well as the chemical and pharmaceutical industries (45 percent) in particular found it necessary to adjust plans to changing external influences and to restart migration projects – often also for budgetary reasons.
In contrast, just as many companies (47 percent) continued to pursue their transformation projects initiated before the pandemic without making any changes. The S/4HANA migration has been suspended until further notice in only a very small proportion of the organizations surveyed (6 percent).
Overall, the S/4HANA transformation remains a top priority. With regard to the varying pace of the changeover, those companies that convert quickly gain a particularly high competitive advantage – they are more likely to be able to meet the requirements of the “new normal”.
Drivers for an accelerated implementation
In some companies, the migration projects have even been accelerated. This development was due to three main drivers: In addition to the pressure to achieve efficiency improvements in IT and business processes, there are – first and foremost – changed requirements from the business departments. These two motives are driving 64 percent of companies to adapt and strengthen their existing S/4HANA roadmaps. For one in two of the decision-makers surveyed (54 percent), a further key reason for accelerating the pace of transformation is the need to establish new digital business models.
Brownfield, Greenfield or hybrid approach? Migration preferences
The study also sheds light on current preferences regarding the chosen migration path. Whereas in the first edition of the study in 2019 many SAP customers still preferred a technical migration (Brownfield) of the existing systems, significantly more companies are now opting for a mixed approach of Brownfield and Greenfield (new implementation). More than half of the study participants who are about to launch a migration project want to do so using a colorful approach such as Bluefield.
This hybrid approach allows companies to retain relevant data and processes while streamlining systems. Depending on the initial situation, a decision is made as to which data and systems should be migrated and in which way – with the aim of preparing IT for the digital future in the best possible way. In particular, industrial and energy companies, the FMCG sector, and the chemical and pharmaceutical industries are known to rely more often than average on a combined approach to leverage the potential of S/4HANA.
Hybrid cloud as preferred S/4HANA operating model
There have also been changes with regard to preferred S/4HANA operating models: in 2019, around two-thirds of the SAP user companies surveyed still wanted to operate their S/4HANA installations in on-premise data centers. This trend has been reversed: according to the current survey, 61 percent are opting for hybrid cloud environments. Here, a combination of on-premises and a privately operated cloud is the most common model, with a hybrid environment of on-premises and public cloud in second place. In comparison, pure on-premise utilizations on the company's own servers (21 percent) and the private (10 percent) or public cloud (8 percent) are much less popular.
"These altered plans with regard to cloud use show that a large proportion of companies do not just regard the migration to S/4HANA as an unwelcome necessity, but would much rather like to use the ERP conversion to seize the opportunity to accelerate and improve processes and to increase the flexibility of the ERP landscape as a whole," the study authors assess the results.
Microsoft Azure (70 percent) and AWS (29 percent) are cited as particularly popular technology platforms for S/4HANA operation in the cloud.
System conversions: Where companies stand today
Alas, where is it precisely that companies are standing today with regard to their migration projects? By mid-2020, just under half (44 percent) of the study participants had already completely or partially finalized their ERP implementation. The companies surveyed from the financial services (60 percent), chemicals/pharmaceuticals and energy sectors (50 percent each) were particularly well-advanced in terms of completed and already started conversions. In addition, one-third of the study paticipants found themselves in the strategy and roadmap phase, i.e., immediately before the rollout. Despite the ever-present pressure to digitize, however, only a few companies (4 percent) had started planning the transformation project from scratch – which indicates a wide range of challenges and uncertainties, especially – if not only – during the pandemic.
Trend toward remote migration
Out of the companies that had already initiated the S/4HANA rollout during the research phase of the survey or had completed it in 2020, nearly half (45 percent) reported that all phases of the project had been carried out remotely. The shift is not a recent trend: 57 percent of companies had even planned to implement projects remotely prior to the outbreak of the global pandemic.
However, there are differences regarding the implementation depending on the revenue group. While just under four out of ten of the companies surveyed with up to 1 billion euros in sales revenues had already been implementing their S/4HANA projects completely remotely, 48 percent of the companies with more than 1 billion euros in sales revenues have already migrated remotely.
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